JC Penney said Monday that it has officially completed its sale to mall landlords Simon and Brookfield, allowing him to exit Chapter 11.
“Today is an exciting day for our company as we have achieved our goal of putting JC Penney as a private company on a safe path for the future so that we can continue to serve our loyal customers,” said Jill Soltau, Penney CEO said in an explanation.
The sale, approved on November 9 by US bankruptcy judge David Jones, means the Penney operating company has left Chapter 11 and opened 690 stores under the JC Penney banner.
The bankruptcy proceedings are still pending and a separate property sale is expected to be completed in January.
Soltau said that the milestone sale of the operating company would not have been possible “without the commitment and hard work of our employees and the support of our supplier partners”.
Penney’s new owners, who are also landlords, said they had confidence in the retailer’s future during the bankruptcy process.
“We have always had a strong belief in JC Penney and are excited to help maintain this iconic institution and save tens of thousands of jobs,” said David Simon, Chairman and CEO of Simon Property Group. “JC Penney is now ready for a future that is innovation and consumer focused while continuing to navigate the pandemic. We look forward to JC Penney’s future growth and look forward to working with the JC Penney team to serve its customers and communities. “
Brian Kingston, Brookfield Asset Management’s real estate chief executive officer, said the Penney investment is exactly what Brookfield’s funded “retail revitalization program” is intended to achieve.
“We are excited to help shape the turnaround of an institution steeped in tradition, while saving tens of thousands of jobs and continuing to serve over 35 million customers,” said Kingston.
Penney’s had a letter of intent for a while but the completion of the sale had been delayed in recent weeks. The court has also approved Penney’s sale of some of his properties. Six distribution centers and 160 Penney stores will be owned by a group of lenders. Penney will pay them an annual rent of about $ 150 million.
The retailer exits bankruptcy with a $ 1.5 billion asset backed loan and a small amount of cash. But Penney and other department stores were already struggling before the COVID-19 virus posed a major new challenge for retailers who sell clothing and fashion versus those who sell food and drink. Customers huddled at home and Penney and a few dozen US national retailers filed for bankruptcy. Now the winter flood of cases has created more uncertainty.
Penney’s reorganization plans have been challenged by both creditors and shareholders who believed the retailer was worth more than the proposed sales would bring. But their efforts were unsuccessful as Penney’s attorneys and advisors came up with a case that showed no one else had come forward to pay more for Penney.
At the same time, Penney had some setbacks with suppliers and employee turnover. A major public loss was Sephora’s decision not to extend a contract beyond 2023 to do business in Penney stores. Instead, Sephora announced that it would move the stores to the shops of its competitor Kohl.
Penney filed for bankruptcy on May 15 after its stores closed during the pandemic. The retailer closed 156 stores and reduced its workforce from 85,000 to 60,000. Penney also recently left its headquarters in Plano, which it was not using, as most of its employees work from home.
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